Home ›› 11 Jun 2023 ›› Front
Amid the rising construction material prices, the government in FY2023-24 plans to impose fresh taxes on land and flat registration and increase import duties on different products of the real estate sector, which would create more hurdles on the path to ensuring affordable housing for all.
Considering the consequences of such moves, economists and sector people have urged the government to reform the policies and make a roadmap first.
They said the government needs to take proper initiatives to provide land, flats and construction materials at reasonable prices to ensure access for all to adequate, safe and affordable housing as well as upgrade slums by 2030 in line with the Sustainable Development Goals (SDGs).
Amid the ongoing economic shocks in the country, the real estate sector has been stagnant for a while now. In this situation, the new additional tax on various construction materials in the proposed national budget for FY24 will put the sector in more trouble in future.
Talking to The Business Post, Real Estate and Housing Association of Bangladesh (REHAB) President Alamgir Shamsul Alamin Kajal said that a proliferation in income tax at source during land registration and a new additional tax on various construction materials in the proposed FY24 budget will jeopardise the housing industry.
“If the proposed budget is not revised, the prices of land and flats will increase further and it will impact the customers. Fulfilling the dream of housing for many will become more difficult,” Alamgir, also the managing director of Shamsul Alamin Real Estate Limited, said.
Finance Minister AHM Mustafa Kamal tabled the proposed Tk 7,61,785 crore budget for FY24 in parliament on June 5.
In it, the minister proposed to hike the tax at source rationally during land registration in areas under and outside the jurisdiction of Rajdhani Unnayan Kartipakkha (RAJUK) and Chattogram Development Authority (CDA).
Housing industry to face risks
According to the SRO Act-167/Income Tax/2023, the government has fixed 8 per cent of the deed value or Tk 20,00,000 — whichever is higher per katha — for commercial areas like Motijheel, Dilkusha, North South Road, Motijheel Expansion areas and Mohakhali of Dhaka.
Besides, the rate of tax for land or land and building located at Uttara (Sectors 1-9), Khilgaon rehabilitation area (besides 100 Feet Road), Azimpur, Rajarbagh rehabilitation area (beside Bishwa Road) of Dhaka, and Agrabad, Halishahar, Panchlaish, Nasirabad, Mehedibag of Chittagong will be 8 per cent of the deed value or Tk 3,00,000 — whichever is higher.
The act also stated that, provided that any structure, building, flat, apartment or floor space is situated on the land, an additional tax shall be paid at the rate of Tk 800 per square meter or 8 per cent of the deed value of such structure, building, flat, apartment or floor space, whichever is higher.
On the other hand, for areas under the jurisdiction of Gazipur, Narayanganj, Munshiganj, Manikganj, Narsingdi, Dhaka and Chittagong districts (excluding RAJUK and CDA), and within any city corporation (excluding Dhaka South and North) and Cantonment Board, the tax rate for land or land and building will be applied at 6 per cent of the deed value.
Also, for areas of any other municipality, the rate will be 4 per cent of deed value, and it will be applied at 2 per cent of deed value for some areas of the country.
“In the new budget, the government has proposed to impose a tax of Tk 20 lakh per katha in many areas, or 8 per cent of the contract value, instead of the existing 4 per cent.
“Also, in the case of flats, the tax was 10-12.5 per cent earlier, but the budget proposes to hike it to 14-16.5 per cent. If this happens, the sector will fall into big trouble,” REHAB Vice-President Kamal Mahmud said.
Construction materials to become costlier
REHAB President Alamgir said that the proposed budget aims to impose additional duties on cement, stone, tiles, lifts, ceramics, glass, switch sockets, cables and kitchenware, the buyers of which are realtors. Through this, the burden of the excessive price of these expensive products will finally fall on the flat buyers.
“We urge the government to review the FY24 budget to protect the housing industry. If the prices of these products are not kept reasonable, the industry will face a huge crisis,” he added.
Alamgir also said that the sales volume in the housing and real estate sector has already decreased significantly due to an increase in the prices of construction materials and a decrease in the prices under the new Detailed Area Plan (DAP).
“I propose to increase the existing specific duty rate of cement clinker from Tk 500 to Tk 700 per metric tonne. I also propose to increase the specific duty rate from Tk 750 to Tk 950 for commercial importers,” the finance minister had said in the proposed budget.
Mohammad Abdul Jalil, the proprietor of Arowa Traders in Dhaka, said, “At present, we are selling BSRM rod at Tk 1,05,000 per tonne, AKS at Tk 1,00,000, and GPI at Tk 98,000. Also, we are selling a 50-kg sack of Holcim cement at Tk 560 and Fresh cement at Tk 530.”
“If the new budget’s proposals are passed, then these prices will be impacted for sure,” he added.
Apartment prices rise every year in Dhaka
According to a survey of real estate solutions provider Bproperty, conducted between January to March 2023, apartment prices increased to Tk 6,798 per square foot (psf) on average in Dhaka’s Adabar area during the survey period. It was Tk 6,003.23 psf in 2022.
The prices at Badda increased to Tk 6,406 in 2023 from Tk 5,501.12 psf last year; to Tk 15,194 this year from Tk 11,804.82 in 2022 at Banani; to Tk 7,459 from Tk 6,367.44 at Banasree; to Tk 10,890 from Tk 10,259.71 at Baridhara; to Tk 9,395 from Tk 8,341.13 at Bashundhara Residential Area; and to Tk 13,563 from Tk 10,681.75 at Dhanmondi.
Also, apartment prices went up to Tk 6,267 psf from Tk 6,067.04 at Mirpur; to Tk 7,258 from Tk 5,825.37 at Mohammadpur; to Tk 7,003 from Tk 5,687.55 at Rampura; and to Tk 8,903 from Tk 7,135.17 at Uttara during the same period.
The Bproperty data also showed that the demand for apartments in the Mirpur area has increased by 24.90 per cent, 10.20 per cent at Uttara, 7.76 per cent at Bashundhara, 7.13 per cent at Dhanmondi, 6.98 per cent at Mohammadpur, 5.75 per cent at Banasree, and 3.14 per cent at Badda.
Fresh taxes to slow investment
Dhaka Judge’s Court lawyer and Dominant Group Legal Adviser Advocate Muhammad Mohiuddin said they handle around 200 land registrations every year. The increased taxes will complicate the registration process, and impede the overall real estate business by reducing buys and sales.
“Many clients will find out loopholes to evade taxes because of the high costs. As a result, the government’s revenue target may decline too. Also, money laundering may rise as people will try to invest in other sectors in different countries too,” he said.
REHAB President Alamgir said the government allowed the investment of undisclosed funds in real estate since FY2020-21 to encourage more investment. As a result, the sector received Tk 20,000 crore in investments in that fiscal year.
“We want a chance to whiten undisclosed money so that investment rises in the real estate sector and that leads to the creation of new jobs, making the sector more vibrant,” he added.
High costs to impede SDGs
Dr Ahsan H Mansur, the executive director of the Policy Research Institute of Bangladesh, said the government has to develop infrastructures under big projects to ensure affordable housing for all by 2030.
“A roadmap is very much required here now. A target on affordable housing with new products like green mortgages and green developer financing can be launched. Banks authorities can also use green bond mechanisms to increase funds,” he suggested.
If the government works cordially here, millions of people will be employed as well. So, policies must be reformed, the economist added.
Bproperty General Manager (Product and Growth) Khan Tanjeel Ahmed said the FY24 budget will put a lot of pressure on primary property due to the increased construction materials prices and the new DAP.
“Reducing registration fees and other fees would help make housing more affordable and allow more people to achieve the goal of owning a house,” he added.
